*EPF407 04/13/00
Banking Group Sees Rise in Capital Flows to Emerging Economies
(Net private flows to reach $200,000 million, IIF says) (500)

Washington -- Private foreign investment in leading emerging market economies is forecast to jump sharply this year from 1999 levels, reflecting substantial economic recovery in many of these countries, the Institute of International Finance, Inc. (IIF) reports.

IIF, which represents more than 300 major private international financial institutions, reported April 13 that net flows to these economies will likely reach $200,000 million this year, up from $150,000 million in 1999. Of the $200,000 million, $172,000 million is projected to be in the form of equity investment.

"The levels of new bond issues, the prospects for new portfolio equity investments and for direct equity investments are healthy," Sir John Bond, chairman of the IIF's Board of Directors, said April 13 in a statement issued in The Hague where the IIF is meeting. A copy of the statement was made available in Washington.

However, the IIF warned against emerging market economies becoming lax about implementing structural reforms and sound macroeconomic policies.

"The markets are recovering from the crises of recent years although the volume of private capital flows remains below levels conducive to sustained, robust growth," Bond said.

The IIF is forecasting economic expansion in emerging market economies at 5 percent in 2000, compared to 3.2 percent in 1999. Asia's growth rate is expected to remain about 7 percent while economies in Latin America rebound, it said.

The report noted that net private capital flows to Latin America are expected to reach $92,000 million in 2000, up from $67,000 million in 1999, led by a nearly doubling of flows to $39,000 million to Brazil. Asia, recovering from a financial crisis that found net flows at just $4,000 million in 1998, is expected to see flows of $60,000 million in 2000, up from $40,000 million in 1999.

The picture is more mixed in Central and Eastern Europe, IIF said, adding that net capital flows to Russia will be marginally up. Strong flows are expected to both Poland and Turkey. Rising confidence in the South African economy is the principal reason flows to the Africa and Middle East category are projected to climb from $9,000 million to $12,000 million this year, the report said.

Following are key figures from the report:

Emerging Market Economies' External Financing
(Thousands of millions of dollars)
1996 1997 1998 1999 2000
est. forecast
Current Account -97.2 -81.7 -10.9 19.3 4.2

Private flows 329.0 266.0 137.0 150.0 198.0

Equity 125.0 141.0 132.0 162.0 172.0
Direct 91.7 115.0 118.0 141.0 130.0
Portfolio 33.7 25.9 14.1 21.0 42.4

Private 204.0 124.0 4.6 -11.9 26.3
Commercial 116.0 35.6 -58.8 -40.5 -11.1
Nonbanks, net 88.1 89.0 63.4 28.6 37.4

Official flows 7.3 44.8 48.1 5.0 -0.8
IFIs 6.7 29.6 37.7 2.6 1.3
Bilateral 0.6 15.3 10.4 2.4 -2.1

(The Washington File is a product of the Office of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)
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